Marketplace Maven Blog

Piracy: Innovation versus Ethics. (Part III)

Does Piracy Hinder Innovation?

Many opponents to piracy believe that piracy hinders innovation. The thought is that if “ﬁrms know that their products will be pirated, they have no incentive to innovate. For ﬁrms piracy means indeed that they won’t get any “reward” for their innovation, and that as they are experiencing a smaller amount of sales, their revenues won’t cover the R&D expenses.” (Rayna, 2004) There is no doubt that piracy, in all forms, “has increased over the past years, [yet] the ﬁrms producing digital goods remain highly innovative. What’s more [these] types of ﬁrms certainly stand among the most innovative ﬁrms. For example, Microsoft, despite piracy, keeps releasing new software.” (Rayna, 2004)

What if the consequences of piracy are good in the long term?

Perhaps it can also be considered that one of the first acts of piracy of intellectual property was committed by one of the most innovative inventors in history, Johann Gutenberg and the printing press. “At the origin of the history of piracy thus lies one of the defining events of Western civilization.” (Adrian, 2009) According to Adrian (2009) “The history of piracy is the history of those transformations. Every time we ourselves buy a book, download a file, or listen to a radio show, our actions rest on it.”

Mason (2008) believes that “pirates, like offshore radio DJs, create periods of chaos and anarchy, but improve things for the rest of us by doing so.” Mason also considered free alternatives to be a form of piracy, and in the software market open-source technology is one example. Open-source software (Wikis, WordPress, Joomla, to name a few) have proven “to be just as effective as—and in many cases more effective than—free-market competition or government regulation when it comes to generating money, efficiency, creativity, and social progress.”(Mason, 2008)

From struggling musicians to movie executives, people in many industries already feel that their future is under fire from piracy. Bill Gates acknowledged this reality to a group of students in 1998. “Although about 3 million computers get sold every year in China, people don’t pay for the software,” said Gates to an audience at the University of Washington. “Someday they will, though, and as long as they’re going to steal it, we want them to steal ours. (Mason, 2008)

Mason(2008), Adrian (2009), and Rayna (2004) all agree that piracy inspires innovation. “Pirates are taking over the good ship capitalism, but they’re not here to sink it. Instead they will plug the holes, keep it afloat, and propel it forward. The mass market will still be here for a long while.” (Mason, 2008)